Movie theater stocks are in the red in reaction to Netflix’s (NFLX) blockbuster announcement to buy streaming and studio assets of Warner Bros. Discovery (WBD) for $72B.
The deal has sent the sector on a downward trajectory in Friday’s midday trading session.
Shares of Reading International (RDI), AMC (AMC), IMAX (IMAX), Marcus Corporation (MCS), Cineplex (OTCPK:CPXGF), and Cinemark (CNK) are down between 3% and 9% by afternoon.
The negative reaction in theater stocks could partly be attributed to the big picture scenario of the deal.
Even though Netflix claims buying Warner Bros. assets will “strengthen the entertainment industry,” it creates a media and streaming behemoth that would have at its disposal the tools to influence content consumption behavior and inadvertently impact moviegoer trends in the long run.
But before that, the deal is expected to come under heavy regulatory scrutiny and is also anticipating retaliation by Paramount Skydance (PSKY) CEO David Ellison, who has made at least five offers to buy Warner Bros. entirely.
In the near term, the movie theater sector stands to benefit from holiday season releases, which kicked off with Disney’s (DIS) Zootopia 2 during the Thanksgiving week. The movie has surpassed $600M at the global box office and saw one of the strongest debuts for an animated film.